PONTIAC -- If being an emergency manager is like a game of chess, Lou Schimmel is about to make his final move.

The city's remaining structural deficit -- where it consistently spends more than it takes in every year -- is $6 million, roughly equal to the annual cost of retiree health care.

Schimmel plans to ask the Michigan Department of Treasury within the next month for permission to eliminate health care benefits altogether for the city's 1,000 or so general employee retirees, most of whom are Medicare-eligible.

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The city would also stop providing supplemental Medicare Advantage insurance for general retirees, for which it pays $362 per retiree per month. The emergency manager said he's planning to provide an opportunity for retirees to continue to purchase their health insurance as a group.

"I would simply love to pay for retiree health care, but -- it's a problem," Schimmel said. "This will structurally fix the city financially."

The emergency manager plans to make a recommendation that the general retirees who would be losing their health care through the city receive an increase in their pension payments from the General Employees Retirement System, which has about $435 million in assets and is approximately 150 percent funded.

"I'm sincerely concerned about paying retiree health care, and I feel bad that the city doesn't have enough money to pay it anymore," Schimmel said.

"I'm concerned, as a result of the city not having enough money, to the point where I'm doing this, trying to make sure that we do the best thing we can for retirees."

The increase in general employees' pension checks "will happen, and it's bulletproof," Schimmel said during an interview Tuesday.

He described the move as a "fallback" position, after the current Pontiac General Employees Retirement System board declined to study ways of using the pension's surplus to fund retiree health care, such as taking the pension's assets out of the stock market, converting them to annuities and transferring the surplus to a trust account for health care.

The increase in pension payments won't be enough to cover the cost of buying one's own health insurance, "but it'll ease the pain," Schimmel said.

The emergency manager's plan to give general retirees a pension increase, something they last received in 2000, doesn't "de-risk" or remove the pension fund from the ups and downs of the stock market, so the emergency manager said he intends to leave a cushion amount above the pension's 100 percent funding level.

The 250 or so police and firefighters who retired after Aug. 22, 1996 would continue to receive health care benefits, as their health care trust has about $38 million in assets.

A group of police and firefighters who retired before 1996 are not covered by the health care trust and receive pensions from the Police and Fire Retirement System, meaning they would be left without retiree health care or a pension increase.

"We're cognizant of the fact that there's a group of police and firefighters that retired before August 1996, and we're looking at options for what we could do to help that group," said City Finance Director John Naglick.

Schimmel, who has said he plans to leave City Hall by the end of the city's fiscal year on June 30, is the city's third state-appointed manager. Since Gov. Jennifer Granholm first appointed Fred Leeb as the city's first emergency financial manager in March 2009, the city's expenditures have been slashed from about $55 million annually to $36 million. During the same time, the city's property tax base has shrunk 60 percent.

The elimination of retiree health care would bring the city's expenditures in line with the roughly $30 million it now receives in annual revenue.

"This is the problem with turnaround. You're trying to fly the plane while you fix it, and while you fix it you're losing revenue," said Finance Director Naglick.

Claudia Filler, the president of the City of Pontiac Retired Employees Association, said retirees under 65 who aren't Medicare-eligible would be most affected by the elimination of their city health care benefits.

"The people who have small pensions are just going to be devastated by this," she said. "They're really going to be hurt."

The retirees' group sent a letter to its members Sunday after meeting with Schimmel last week.

"Mr. Schimmel advised us that he needed $6 million to pay for retiree health care in fiscal year 2013-2014," Filler wrote in the letter.

"He indicated that the city does not have the money, and that retiree health care, including dental, will be eliminated in the fiscal year 2013-2014 budget, to take effect July 1, 2013."

Filler's letter said the group intends to file suit when the retiree medical benefits are eliminated.